Severfield-Rowen PLC (SFR) - Interim Management Statement
RNS Number : 3431Q
05 November 2012
Trading Update and Interim Management Statement
Severfield-Rowen Plc (the "Group"), the market leading structural steel group,
issues this Interim Management Statement covering the period from 1 July 2012
to 5 November 2012.
The Group's UK businesses continue to operate in a difficult climate with the
previously flagged pricing pressure and protraction of contractual settlements
still posing significant challenges as clients and the supply chain compete
harder in a shrinking market.
Our UK businesses have experienced mixed performances. Atlas Ward Structures
and Fisher Engineering, have performed, and continue to perform, at or above
expectations. Our other businesses, Severfield-Rowen Structures, Watson Steel
Structures and Steelcraft Erection Services, which we announced in August will
be merged into Severfield-Watson Structures at the end of 2012, are delivering
below expectations. Their performances have been adversely affected by
unfavourable final account settlements and cost overruns on a small number of
contracts, as well as the re-phasing of other projects by clients.
As a result, it is the Board's view that the Group's profits before tax in
2012 will now be around £1 million. The Board remains confident that the
ongoing business reorganisation and the conclusion of the affected projects
will see an improvement in performance from Severfield-Watson Structures in
calendar Q1 2013, together with continued strong performance from Atlas Ward
Structures and Fisher Engineering.
All four UK factories are producing at planned levels, underpinned by our
consistently strong order book (currently £211 million) and market position.
The Group achieved constant levels of revenues in the period. The performance
levels at Atlas Ward Structures and Fisher Engineering have been good and
these are expected to be sustained in the coming periods.
However, despite maintained revenues, UK profitability in 2012 is now expected
to be materially lower, as a result of the performance of Severfield-Rowen
Structures, Watson Steel Structures and Steelcraft Erection Services.
The re-organisation of these businesses, announced in August 2012, is
proceeding to schedule with the new company, Severfield-Watson Structures,
being established from 1 January 2013, supported by a small number of external
management appointments. The re-organisation is likely to see a headcount
reduction in these businesses of around 50 positions. The resultant changes
will deliver overhead savings of greater than £2 million which, combined with
improved performance in contract engagement and execution, are expected to
return operating margins to between 5% and 6%, over time. One-off costs for
the delivery of the new organisation are not expected to exceed £1 million and
will be non-underlying.
Demand in the UK remains depressed, however the Group's order book levels
continue to be consistently strong. Our outlook for UK demand does not
anticipate a recovery, but we remain confident that our market leading
position and identified future prospects will enable the Group to sustain
activity levels in the coming periods.
JSW Severfield Structures Ltd (JSSL), India
Operations in India have made good progress and are pleasing to both JV
The current order book of £31 million supports activity through its calendar
Q2 2013, and is strongly backed by a robust pipeline of project enquiries, now
totalling in value £168 million.
The planned expansion at our Bellary operations, lifting output from 35,000
tonnes to 55,000 tonnes by summer 2013 is under way and remains on schedule
and to budget.
The level of prospects and opportunities in a wide range of market sectors is
Geoff Wright has supported the Company since September 2006 serving as a
non-executive director on the main board, providing valuable advice on the
status and trends of the UK commercial markets. Geoff has continuously served
as a member of the Remuneration, Audit and Nominations committees.
Geoff will stand down from his role at the end of 2012 but will continue to
provide advice in some commercial areas. The Board and the Company express
their sincere appreciation for his contributions.
As announced in August, net borrowings at the half year period end were £28.3
million and we continue to target a modest improvement in debt levels for the
calendar year, despite the reduced profit outlook.
Cash generation and conservation remain a key focus for the business and
accordingly, there will be no second interim dividend for 2012 but the Board
will consider the final dividend level in 2013.
The Company's results this year are being adversely impacted by a small number
of projects in three of our UK businesses. However, our overall leading
position in terms of market share and activity is undiminished.
The UK order book and the known mix of secured projects, together with the
reorganisation of the affected businesses, lead us to expect a recovery in
business performance starting in 2013.
In India, we see very strong demand for our services and we will continue to
work with our partner to grow the business at the fastest appropriate pace.
Chief Executive Officer
For further information, please contact:
Severfield-Rowen Plc Tom Haughey
Jefferies Hoare Govett Simon Hardy
020 7029 8000
Nicholas 020 7029 8000
Pelham Bell Pottinger Archie
Berens 020 7861 3112
Scarborough 020 7861 3870
This information is provided by RNS
The company news service from the London Stock Exchange
IMSUGGBCGUPPGWA -0- Nov/05/2012 14:00 GMT
Press spacebar to pause and continue. Press esc to stop.